2010 (3) TMI 1259 - AT - Income Tax

Summary

Issues involved: Reopening of assessment u/s.143(3) for assessment year 2005-2006 based on Modvat credit of Rs. 2,09,274 not included in closing stock as per section 145A.

Reopening of Assessment:
The appellant's appeal was against the Commissioner of Income-tax (Appeals) order for the assessment year 2005-2006. The Assessing Officer noted that the assessee failed to include Modvat credit of Rs. 2,09,274 in its closing stock, leading to the reopening of the assessment u/s.147. The Assessing Officer issued a notice u/s.148 on 30.3.2006, beyond the four-year period from the end of the relevant assessment year, which was deemed time-barred as there was no failure on the part of the assessee to disclose all material facts regarding the Modvat credit. The Tribunal held that the assessment based on the time-barred notice was not valid and ordered it to be quashed.

Reasons for Reopening:
The Assessing Officer's reason for reopening the assessment was the failure to include Modvat credit of Rs. 2,09,274 in the closing stock, as required by section 145A of the IT Act 1961. The AO believed that this amount should have been included in the value of the closing stock as per the provisions of the Act. However, the Tribunal found that since the Modvat credit amount was part of the Tax Audit Report annexed to the Balance Sheet filed with the return of income, there was no failure on the part of the assessee to disclose this information. Therefore, the notice issued u/s.148 was beyond the permissible four-year period and was considered time-barred.

Conclusion:
The Tribunal allowed the appeal, holding that the assessment based on the time-barred notice for the reopening of the assessment u/s.147 was not valid. The order was pronounced on 29th March 2010.